Bridgewater's Dalio: U.S economy out of 'intensive care'

NEW YORK, Sept 12 (Reuters) - Hedge fund titan Ray Daliosaid the U.S economy had come out of the "intensive care unit,"but he warned against any quick move to "austerity" budgetmeasures.

"We were in the intensive care unit," Dalio, who runs the$120 billion hedge fund Bridgewater Associates, told more than200 guests at the Council of Foreign Relations in Manhattan onWednesday. "We are largely healed and largely operating in amanner that is sustainable if we don't hit an air pocket."

Dalio said a major challenge for U.S. politicians will bedealing with the so-called fiscal cliff, which many inWashington call the year-end expiration of the Bush-era tax cutsand previously agreed-upon cuts in defense spending and socialprograms.

He sided with economists who worry that a sharp reduction ingovernment spending could lead the United States back intorecession.

"We can't just worry about too much debt," Dalio said. "Wehave to worry about too much austerity."

Dalio, who founded his firm in 1975, is one of the mostsuccessful money managers in the $2 trillion hedge fundindustry. His speech drew other Wall Street luminaries,including famed hedge fund manager John Paulson.

Dalio said he was monitoring the long-simmering financialcrisis in the euro zone, as well as the economic slowdown inChina. He said losses on European debt could reach at least $2trillion.

Asked by an audience member about how much he worries aboutChina, Dalio said volatility there would affect the UnitedStates, but he did not "think they are going to go into atailspin."